Idea in Brief

The Problem

Multibusiness enterprises often struggle with crafting effective strategies because their leaders focus too much on the composition of their portfolios and not enough on enhancing the businesses in them.

The Result

The market capitalization of many diversified enterprises ends up being less than the combined value of their separate businesses.

The Solution

Strategies for adding value fall on a continuum, and leaders need to decide where their enterprises are on it. Each choice involves trade-offs. Successful multibusiness firms understand this and align their structure and management processes with their sources of value creation across the portfolio.

Multibusiness enterprises remain the dominant form of corporate organization today. While crafting strategies for them can certainly be hard, the way many leaders go about it is flawed: They focus too much on the composition of their portfolio and too little on how the corporation should add value to the businesses in it. A corporation’s scope determines its strategic potential, but aligning its structure and management processes with its chosen sources of value creation determines the success of its execution.
A version of this article appeared in the September–October 2024 issue of Harvard Business Review.
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